Judge Leans Toward Allowing Netflix to Challenge Legality of Fox's Executive Deals

A hearing is scheduled on Thursday in an important battle.
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Executive-poaching in Hollywood isn't a topic that often gets litigated, and a dispute between Fox and Netflix is primed to become even more provocative. In advance of a court hearing on Thursday, a Los Angeles Superior Court judge has issued a tentative order denying Fox's attempt to stop Netflix from boldly challenging fixed-term employment agreements.

The lawsuit began in September when Fox sued over Netflix's poaching of programming executive Tara Flynn and marketing executive Marcos Waltenberg. 

That brought counterclaims from Netflix over Fox's employment agreements. Netflix claims that Fox is bullying employees with "take it or leave it" deals that amount to "involuntary servitude" in violation of California Business and Professions Code Section 16600. Demanding declaratory relief, Netflix argues that Fox is "enforcing a system that restrains employee mobility, depresses compensation levels, and creates unlawful barriers to entry for Netflix and others competing in the film and television production business."

This case is being watched closely by employment lawyers throughout California and beyond.

In reaction to Netflix's gambit, Fox brought a motion to strike the counterclaims under California's SLAPP statute, enacted to deter frivolous litigation on First Amendment protected activity. Here, Fox contends that its petitioning for the enforcement of its employment agreements is what caused Netflix to bring its challenge. If the judge accepts this, the judge would then analyze whether Netflix has a likelihood of prevailing before moving those counterclaims forward.

L.A. Superior Court Judge Gerald Rosenberg doesn't articulate much reasoning in a tentative order denying Fox's motion, which could mean that the decision isn't necessarily set in stone. But in his latest tentative, he does write, "The basis for the Cross-Complaint is not protected conduct. It is the alleged use of agreements that unlawfully restrict the mobility of employees not the means of enforcement whether by cease and desist letter or litigation."

This suggests the judge sees Netflix's move to be a routine counterclaim, however ambitious its goals. It also means that the judge needn't analyze at this stage Netflix's chance at winning on the merits of its interpretation of the California Labor Code. 

Of course, Rosenberg could change his mind and rule in favor of Fox when all is said and done. But if the tentative at least demonstrates which way the judge is leaning, it's welcome news for Netflix, which has indicated its interest in poaching more entertainment executives. 

If Rosenberg goes ahead with a denial, Fox would have a right to appeal under California's SLAPP statute. Fox could also be responsible for Netflix's legal costs in defending the motion.